The good news is that couples earning less than $300,000 ($250,000 singles) won’t face many hits. But folks earning more than this threshold will be hit with substantially higher taxes.
Let’s look at a few of the highlights that might affect your 2012 (and beyond) taxes.
Death and gifts. It’s safe to die again. There is now a permanent amount for the estate and gift tax exclusion (the amount not taxed in your lifetime or upon your death): $5 million per person.
There is also portability. In other words, if a couple’s estate is only worth $2.25 million when the wife dies, the balance of her exclusion is still available. The surviving husband may add that to his $5 million so that when he dies, his estate can exclude up to $7.75 million from estate and gift taxes.
This change is mainly to prevent the breakup of family businesses and family-owned real estate assets. Also, this means a very small percentage of the population will ever be subject to estate and gift taxes.
Two percent withholding increase. You likely already know about this: Aside from seeing it on your paycheck, this increase was covered in a previous blog.
The Pease limitation. About a decade ago, itemized deductions were phased out. EGTRRA, aka the Bush Tax Cuts, repealed the itemized deduction phaseout. But now phaseouts are back for folks whose incomes reach the following: $300,000 for married couples and qualified widows and widowers; $250,000 for singles; $275,000 for heads of households; and $150,000 for couples filing separately.
Expenses not subject to this deduction phaseout include:
The personal exemption phaseout. The personal exemption rises to $3,900, up from the 2012 exemption of $3,800. However, the same income limits now apply as for the Pease exemption. Once your income exceeds these limits by $125,000, you lose your exemptions. (There is a 2 percent reduction for every $2,500 of income.)
Medical deductions. This year, to claim a deduction, medical expenses must be at least 10 percent of adjusted gross income. Seniors over age 65 are exempt from this higher exclusion.
Those with higher incomes. The following income levels are being hit on a variety of tax issues: jointly filed tax returns with income of $450,000 or above; singles with incomes of $400,000 or above; heads of household with incomes of $425,000 or above.
These are some of the key highlights for individuals. There are many, more provisions, especially relating to businesses. The Equifax Blog team will be covering that in depth for you this year.
If you have questions about how the new tax laws might affect your tax filing, consider consulting a tax professional.
Eva Rosenberg, EA is the publisher of TaxMama.com , where your tax questions are answered. Eva is the author of several books and ebooks, including the new edition of Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and tax courses you might enjoy at http://www.cpelink.com/teamtaxmama.
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